India's retail market is entering a new phase in 2026, and the next wave of growth is no longer limited to traditional metropolitan centres.
Retailers are increasingly looking beyond the largest cities to identify neighbourhoods, emerging urban markets and Tier-II and Tier-III cities where consumer demand is rising but organised retail penetration remains relatively low.
The shift is being supported by higher consumption, expanding digital payments, improving infrastructure, residential development, rising aspirations and the growing reach of e-commerce and quick commerce.
The latest Kearney India Retail Index (KIRI) 2026 takes this trend further by examining more than 880 Indian cities and over 8,000 urban PIN codes, showing that retail opportunity can vary substantially even between neighbouring areas of the same city.
Kearney estimates that about 11% of urban PIN codes—around 901 locations—qualify as retail growth hotspots because demand is high while organised retail supply remains comparatively low.
This means the question for retailers is increasingly changing from “Which city should we enter?” to “Which neighbourhood, customer segment and store format should we target?” Cities such as Hyderabad, Pune, Jaipur and Lucknow have improved their retail potential, while markets such as Mohali, Palakkad, Tirupati and Shivamogga are emerging as potential “hidden gems.”
At the same time, established markets such as Mumbai, Bengaluru and Delhi-NCR continue to generate substantial retail demand.
India Retail Market 2026: Emerging Cities Driving Consumer Demand
India's retail sector has been expanding alongside economic growth, urbanisation, digital adoption and changing consumer preferences. The India Brand Equity Foundation (IBEF) estimates that India's overall retail sector could exceed ₹137.1 lakh crore (about US$1.6 trillion) by 2030, compared with around ₹81.6 lakh crore in 2024. The organised retail segment is also projected to reach approximately US$230 billion by 2030.
The growth story is increasingly broad-based. Tier-II and Tier-III cities are becoming important contributors to consumption as consumers gain better access to branded products, digital payments, e-commerce and modern retail formats.
IBEF notes that nearly 100 million new consumers from Tier-II and Tier-III cities could be added to branded and organised retail by 2030. This represents a major opportunity for retailers that can identify the right markets and adapt their offerings to local purchasing behaviour.
The expansion of physical retail is also being influenced by the growth of online commerce. Consumers in smaller cities are increasingly discovering brands online before buying products through websites, marketplaces or physical stores.
This creates an important opportunity for retailers. A consumer may first encounter a brand through social media or e-commerce and later visit a physical store for trial, comparison or experience.
As a result, physical and digital retail are becoming increasingly connected rather than competing channels.
The most important development in the latest retail research is the move from broad city-level analysis to hyperlocal retail intelligence.
Kearney's India Retail Index 2026 evaluates retail potential across 880 cities and more than 8,000 urban PIN codes. It analyses both demand and supply to determine where retail opportunities are strongest. The methodology considers factors such as population, demographics, income, consumption, digital payments, online consumption, organised retail presence, brand penetration, rents, labour costs and ease of doing business.
KIRI 2026 identifies approximately 901 urban PIN codes, or around 11% of the urban locations analysed, as growth hotspots.
These locations have relatively high consumer demand but comparatively low organised retail supply. That combination creates what retailers call a “white space” opportunity.
By comparison, around 19% of urban PIN codes are classified as established hubs, where both demand and retail supply are high. About 3% fall into saturated clusters, where supply is high relative to demand, while approximately 67% are categorised as low-priority markets.
A city can contain several very different retail markets.
One neighbourhood may have premium housing, offices, high disposable income and strong demand for branded products. Another neighbourhood in the same city may be more price-sensitive and better suited to value retail.
Therefore, a retailer that simply decides to enter a city may still select the wrong location or store format.
KIRI 2026 attempts to address this problem by examining retail potential at a much more granular level.
Hyderabad has emerged as one of the strongest performers in KIRI 2026.
The city moved from sixth place in 2021 to fifth in 2023 and third in 2026, according to Kearney. Its improvement has been associated with the city's expanding technology and artificial intelligence ecosystem, infrastructure upgrades, premium housing development and government-led initiatives.
The city's broader economic performance also supports its retail potential. In Q1 2026, Hyderabad accounted for 9% of India's retail leasing activity according to JLL, while its office market recorded approximately 3.16 million sq. ft. of gross leasing, up 25.1% year-on-year.
Hyderabad benefits from several structural factors.
The combination of employment growth and residential expansion can create new consumption centres beyond established retail districts.
As residential and commercial development moves into newer corridors, retailers can find opportunities in areas that previously lacked major organised retail.
This is particularly important for fashion, food and beverage, electronics, beauty, lifestyle and entertainment businesses.
Pune has also climbed the Kearney retail rankings, moving to sixth place in 2026. Kearney attributes the city's improvement to stronger organised retail presence, digital-payment penetration, attractive commercial rents and continued office and residential development in corridors such as Hinjewadi, Kharadi and Wagholi.
Pune's wider commercial ecosystem is another supporting factor. JLL reported healthy retail and office activity in the city during 2026, although retail supply remained constrained in Q1.
Pune's IT and employment hubs create sizeable consumer catchments.
Areas experiencing a combination of:
can become attractive locations for organised retailers.
Retailers are increasingly looking for markets where consumer demand can grow alongside infrastructure.
Pune's expanding residential and employment corridors provide that combination, making the city important for retailers looking beyond India's largest metropolitan markets.
Jaipur is another city that has improved its position in the Kearney index. The city moved to 10th place in 2026, up from 11th in 2023.
Its retail potential is supported by a combination of tourism, residential growth, local consumption and increasing organised retail presence.
Recent retail real-estate data also shows Jaipur's growing importance.
According to a CBRE-based assessment reported by IBEF, fashion and apparel retailers accounted for around 69% of leasing activity in Chandigarh and Jaipur during H1 2026. This indicates strong demand from organised fashion retailers in these markets.
The city has several consumer segments operating simultaneously.
These include:
This diversity gives retailers opportunities across fashion, jewellery, food, beauty, lifestyle and hospitality.
Lucknow has also moved up the Kearney retail rankings.
The city ranked 12th in KIRI 2026, improving from 13th in 2023. Kearney attributes the rise of Lucknow, Jaipur and Kochi partly to an expansion of organised retail presence, while Lucknow also benefits from attractive commercial rents.
Lucknow is developing as a major consumption and services centre in northern India.
Its retail ecosystem is supported by:
The city also has the potential to serve consumers beyond its municipal boundaries because shoppers from surrounding towns and districts can travel to Lucknow for higher-value purchases and experiences.
Retail growth in Lucknow is no longer restricted to established commercial centres.
New residential developments, business districts, highways and transport improvements can create additional retail catchments.
For retailers, this makes location selection particularly important because different parts of the city can have very different consumer profiles.
Kochi has also improved its position in the Kearney index and reached 15th place in 2026. Kearney highlights both stronger organised retail presence and attractive commercial rents as factors behind the city's improvement.
The city serves not only its resident population but also a wider regional catchment.
Kochi's retail potential is linked to:
CBRE's H1 2026 data also shows that fashion and apparel retailers expanded strongly into Tier-II markets, with these retailers accounting for about 65% of leasing activity in Kochi.
This demonstrates how retailers are increasingly treating cities outside the largest metros as serious expansion markets.
Noida is another important addition to the retail landscape.
KIRI 2026 places Noida at 16th, highlighting its high offline and online consumption per capita, strong digital-payment penetration and expanding office ecosystem.
Noida's expanding office market creates a large daily population of employees and professionals.
This supports demand for:
Its connection to the wider Delhi-NCR region also gives retailers access to a large consumer base.
The Kearney report also identifies a number of smaller markets with high retail potential but relatively low organised retail penetration.
Mohali is among the notable additions to the 2026 list of hidden-gem cities.
Mohali has been experiencing increasing activity across IT, healthcare and services.
The city is also seeing significant private investment in retail infrastructure, including a reported ₹2,000 crore mall project.
The combination of employment, housing and modern retail infrastructure could make Mohali an important consumption centre in the Chandigarh Tricity region.
Palakkad is another emerging market highlighted by Kearney.
The city is benefiting from industrial development, including the Palakkad Industrial Smart City, which has an estimated project cost of about ₹3,600 crore and is expected to support more than 50,000 jobs.
New industrial employment can expand the local salaried population and increase demand for organised retail.
Potential growth areas include:
This illustrates why retail investors increasingly need to track employment and infrastructure development rather than looking only at existing shopping centres.
Tirupati is another city identified among Kearney's hidden gems.
Its retail potential is supported by airport upgrades, tourism infrastructure and the continued modernisation of the temple ecosystem. Kearney also points to the Tirupati Smart City project and a ₹600 crore tourism and hospitality project launched in 2025.
Tourist-heavy markets have a different retail structure from ordinary residential cities.
Visitors can create demand for:
For retailers, this means understanding not just resident consumption but also visitor spending patterns.
Shivamogga, also known as Shimoga, is another emerging market identified by Kearney.
The inauguration of Shivamogga Airport in 2023 improved the city's connectivity and widened its effective catchment, according to the KIRI 2026 assessment. Increased passenger movement can support tourism, business activity and consumer spending.
Better connectivity can change a city's retail potential significantly.
When travel becomes easier, cities can attract:
Retailers can therefore benefit from monitoring infrastructure projects before they become fully reflected in conventional retail statistics.
Bathinda is another hidden-gem market identified by Kearney.
The report points to planned downstream capital expenditure, including a ₹2,600 crore refinery expansion by HMEL, as a factor that could increase the city's industrial workforce and income base.
Industrial investment can create a new consumer base even before modern retail infrastructure catches up.
As employment and household incomes rise, demand can increase for:
This creates opportunities for retailers that can enter early while managing location and operating costs carefully.
The Kearney study identifies several other markets with strong potential and comparatively low organised retail penetration.
The hidden-gem list includes cities such as Zirakpur, Kota, Bhuj, Patiala, Udupi, Shimoga, Tirupati, Rohtak, Nagercoil, Vapi, Ambala, Hosur, Bathinda, Jamshedpur, Kurnool, Karnal, Jabalpur, Madurai, Ujjain, Guntur, Tiruchirappalli, Rajahmundry, Bareilly and Ahmadnagar.
These markets should not necessarily be treated as identical opportunities.
Their potential can vary by:
For example, a city may be highly attractive for value fashion but less suitable for luxury retail.
Instead, the retail opportunity is becoming more granular.
Kearney's research identifies nearly 100 underserved neighbourhoods within the major metros, demonstrating that even mature cities can contain significant pockets of unmet demand.
Kearney's Mumbai analysis demonstrates how retail potential can vary dramatically within one metropolitan area.
Areas such as Borivali West, Kandivali West, Goregaon West and Versova show opportunities for economy-oriented retail, while some affluent locations such as Worli Sea Face and Malabar Hill offer opportunities for premium and luxury formats.
This shows why the next retail hotspot may not necessarily be a new city.
It could be a previously overlooked neighbourhood inside an established metropolitan market.
CBRE reported that India's retail real-estate market recorded approximately 8.9 million sq. ft. of absorption in 2025, the highest level recorded in its assessment. Hyderabad led H2 2025 retail take-up with a 34% share, followed by Delhi-NCR at 20% and Chennai at 16%.
JLL reported that retail leasing remained at approximately 3.1 million sq. ft. in Q1 2026. Although quarterly leasing moderated, mall vacancy fell from 12.3% to 11.9%, while high streets captured 48% of quarterly leasing activity.
The limited availability of new institutional-grade malls is pushing some retailers toward high streets and other formats.
This can benefit emerging neighbourhoods where organised high-street retail is still developing.
Retailers can therefore use multiple formats, including:
CBRE data for H1 2026 showed organised retail leasing rising 20% year-on-year to about 3.9 million sq. ft. Fashion and apparel accounted for around 40% of total leasing.
Importantly, the report found strong expansion outside the largest metropolitan markets.
Fashion and apparel retailers accounted for approximately 69% of leasing activity in Chandigarh and Jaipur and about 65% in Kochi during the period.
This suggests that consumer demand for branded fashion is spreading geographically.
Digital-first companies can use online sales to test demand in a city before opening physical stores. Once sufficient demand is established, they can move into physical retail to improve visibility, customer experience and trust.
According to an Unicommerce report cited by IBEF, Tier-II and Tier-III cities are expected to contribute nearly 66% of new D2C orders in FY26. Order volumes increased 33%, while gross merchandise value rose 32%.
The relationship between e-commerce and physical retail is becoming increasingly important.
A D2C brand can:
This omnichannel model can make expansion into emerging markets more efficient.
India's UPI infrastructure allows consumers to make instant digital payments at physical stores, restaurants and online platforms.
According to IBEF, UPI processed 20.39 billion transactions worth more than ₹28.33 lakh crore in January 2026.
Digital payments can help retailers by:
As digital adoption spreads, retailers can serve consumers in emerging markets with increasingly sophisticated omnichannel models.
There is no single factor that determines whether a city will become a successful retail market.
Instead, several indicators need to be considered together.
Higher disposable income generally supports greater spending on discretionary categories such as fashion, electronics, beauty, dining and entertainment.
Young populations can create demand for modern retail formats, brands, entertainment and digital commerce.
Roads, airports, metro systems and public transport can expand the effective catchment of a retail location.
New housing creates new consumer clusters that may initially be underserved by organised retail.
New offices, industrial facilities and services businesses can increase the number of consumers with regular disposable income.
High internet, smartphone and digital-payment penetration can support omnichannel retail.
A market with high demand but limited organised supply can offer greater expansion opportunities than a highly saturated market.
A city with strong demand but excessive rents may still be unattractive if store-level profitability is difficult to achieve.
The biggest lesson from the latest retail data is that city-level averages are no longer enough.
Two stores of the same brand can perform very differently within the same city.
A premium store may succeed in an affluent residential neighbourhood but struggle in a price-sensitive catchment. Similarly, a value-focused retailer may perform strongly in an area where consumers prioritise affordability but find limited demand in a premium district.
Kearney's research therefore emphasises matching location, category, price segment and store format rather than simply increasing store counts.
Retail expansion in 2026 is increasingly about precision.
Before entering a market, retailers need to understand:
This approach can reduce the risk of investing heavily in locations that appear attractive at the city level but do not provide sufficient store-level demand.
The changing retail map creates opportunities for several types of businesses.
Large chains can use hyperlocal data to decide where to open new stores and which existing locations need resizing or repositioning.
Digital-first companies can use online order data to identify cities and PIN codes where physical stores could complement e-commerce.
Local entrepreneurs can identify underserved categories before larger national chains enter the market.
Retail growth can support investment in malls, high streets, mixed-use developments and neighbourhood shopping centres.
Markets with growing employment, infrastructure and consumer spending can offer long-term opportunities, although location-specific risks still need to be evaluated.
India's retail expansion is no longer a simple story of brands moving from smaller cities into Mumbai, Delhi or Bengaluru.
The market is becoming multi-directional.
Established metros continue to generate huge demand, while cities such as Hyderabad, Pune, Jaipur, Lucknow and Kochi are strengthening their retail positions. At the same time, smaller markets such as Mohali, Palakkad, Tirupati, Shivamogga and Bathinda are showing characteristics that could support future organised retail growth.
The rise of digital commerce is making this transition even faster because consumers in smaller markets can discover and purchase national and international brands without waiting for a physical store to arrive.
India's retail growth story in 2026 is increasingly being shaped by emerging cities, new neighbourhoods and hyperlocal consumer markets. The latest Kearney India Retail Index shows why retailers need to look beyond broad city rankings and examine demand, supply, pricing, digital behaviour and infrastructure at the local level. Its analysis of more than 880 cities and over 8,000 urban PIN codes identifies around 901 urban locations as potential growth hotspots where consumer demand is strong but organised retail supply remains comparatively limited.
Hyderabad, Pune, Jaipur, Lucknow, Kochi and Noida are among the markets gaining importance, while Mohali, Palakkad, Tirupati, Shivamogga and Bathinda represent smaller markets with emerging potential. Meanwhile, strong retail activity in major metros confirms that India's established cities will remain crucial to the sector.
The bigger change is therefore not simply metros versus Tier-II cities. It is the move toward more precise retail expansion, where brands identify the right city, PIN code, neighbourhood, customer segment and store format. With organised retail expanding, D2C brands moving offline, digital payments becoming widespread and infrastructure improving across the country, India's next retail growth phase could be driven by places that have traditionally received less attention.